Bungled Renewable Heat Incentive scheme 'to cost taxpayers £1 billion'
The fallout of a green energy 'cash-for-ash' scheme in Northern Ireland is both political and financial.
A bungled green energy scheme set up in Northern Ireland is set to cost UK taxpayers more than £1 billion and has ignited a major political crisis.
The non-domestic Renewable Heat Incentive (RHI) scheme was launched in 2011 to encourage farmers and businesses to install and run heating systems like biomass boilers, which use renewable energy for power.
Crucially, Northern Ireland’s scheme was more generous than those offered in Britain and did not include any tariff controls, which left it open to abuse.
Those in Northern Ireland that signed up and were approved could pocket £160 for every £100 they spent on renewable fuels, such as wood pellets.
As the subsidy was greater than the actual cost of the fuel, thousands piled in.
It means an initiative that was meant to cost £25 million over five years will now cost £1.15 billion over 20 years.
Flaws in the scheme
The scandal ‒ which has been dubbed ‘cash-for-ash’ ‒ came about as a result of "serious systematic failings from the start", according to Kieran Donnelly, Northern Ireland’s auditor-general.
He estimates that a business in Britain could get RHI subsidies of £192,000 over 20 years if it ran a boiler all year, while in Northern Ireland it would provide a whopping £860,000.
An investigation was launched into RHI in February 2016 after a spike in applications in 2015 and concerns the scheme was being abused.
One whistleblower revealed that a farmer was intending to collect £1 million over 20 years by heating an empty shed with a biomass boiler.
The same business was also planning on heating a number of empty factories to net £1.5 million over 20 years.
The cost
The RHI scheme closed in Northern Ireland on February 29, 2016 as costs started to spiral, but it still has to make payments to the successful applicants that were approved when it was open.
Around 1,946 RHI business applications were approved before it closed. A subsequent independent audit found issues with over half of the 300 installations inspected.
14 were labelled as fraudulent and five of these have been suspended.
The Treasury can claw back £490 million shortfall from Northern Ireland’s block grant, but the remaining £660 million will be financed by taxpayers in England, Scotland and Wales.
Interested in a SIPP or stocks and shares ISA? Visit the loveMONEY investment centre today
The fallout
The debacle has led to a major political fallout.
Northern Ireland’s first minister Arlene Foster, leader of the Democratic Unionist Party (DUP) was responsible for setting up the scheme back in 2012, when she held the role of Department of Enterprise, Trade and Investment (DETI) minister.
Martin McGuiness, the deputy first minister of the Sinn Fein party, has resigned in protest against the handling of the botched energy scheme.
Under Northern Ireland’s power-sharing agreement, Forster will lose her first minister role with the departure of the deputy first minister, which could leave the country in political turmoil.
The move could even mean the collapse of the Northern Irish Government established when Rev Ian Paisley agreed to share power 10 years ago.
Interested in a SIPP or stocks and shares ISA? Visit the loveMONEY investment centre today
More from loveMONEY:
Comments
Be the first to comment
Do you want to comment on this article? You need to be signed in for this feature